Qenos is the only manufacturer of polyethylene in Australia. The Sydney plant of Qenos manufactures LDPE (Low density polyethylene) which is used for cling wrap and shopping bags. It also makes HDPE (High density polyethylene) which is used to make containers for milk products and other liquids. Obviously there is no guarantee that any business will remain in situ but given the infrastructure that is in place it would be a significant decision to close the business down. Qenos does have another plant in Altona which makes a variety of plastics including HDPE from Bass Strait hydrocarbons (oil) but not LDPE which is the Sydney plant speciality. The pipeline owned by EPX carries ethane (a gaseous by product of oil extraction) from Moomba to Sydney. Qenos advises EPX of its budgeted ethane requirements and EPX supplies the gas. The latest prediction is the ethane requirements to 2014. One would expect the next budget to 2016 and so on. If Qenos decides to cease manufacture of LDPE in Australia or move LDPE to Altona then EPX would lose its sole customer. As with all share buying decisions there is risk but as long as one is aware of that risk then a rational choice can be made on whether to buy or not.
EPX Price at posting:
$1.88 Sentiment: Buy Disclosure: Held
